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Item 1A. Risk Factors.

There are many factors that may affect our business and results of operations, including the following risks relating to: (1) the demand for our products and services and our ability to grow our customer base; (2) our business operations, including internal and external factors that may impact our operational continuity; (3) our international operations; (4) our supply chain; (5) domestic and foreign taxation and government regulation and oversight; and (6) more general risk factors that may impact our business.

Risks Related to the Demand for our Products and Services and our Customer Base

Changes to the industries and markets that we serve could have a material adverse effect on our liquidity, financial position and results of operations.

As a leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by our customers that participate in the steel, automotive, industrial equipment, aerospace, aluminum and durable goods industries. Because demand for our products and services is largely derived from the global demand for our customers’ products, we are subject to uncertainties related to downturns in our customers’ businesses and shutdowns or curtailments of our customers’ production, including as a result of adverse changes affecting national, regional and global economies or increased competitive pressure within our customers’ industries. Our customers may experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing, leading them to delay or cancel plans to purchase products, and they may not be able to pay our bills or fulfill their other obligations in a timely fashion. We have limited ability to adjust our costs contemporaneously with changes in sales; thus, a significant sudden downturn in sales or increased credit losses due to reductions in global production within the industries we serve and/or weak end-user markets could have a material adverse effect on our liquidity, financial position and results of operations. Further, our suppliers and other business partners may experience similar conditions, which could impact their ability to fulfill their obligations to us and also result in material adverse effects on our liquidity, financial position and results of operations.

Changes in competition in the industries and markets we serve could have a material adverse effect on our liquidity, financial position and results of operations.

The specialty chemical industry is highly competitive and there are many companies with significant financial resources and/or customer relationships that compete with us to provide similar products and services. Some competitors may be able to offer more favorable or flexible pricing and service terms or may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or to changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us. The pricing decisions of our competitors could lead us to decrease our prices which could negatively affect our margins and profitability. In addition, our competitors could potentially consolidate their businesses and gain scale or better position their product offerings, which could have a negative impact on our profitability and market share. Competition in our industry historically has also been based on the ability to provide products that meet the needs of the customer and render technical services and laboratory assistance, which our competitors may be able to accomplish more effectively than us. If we are unsuccessful with differentiating ourselves, it could have a material adverse effect on our liquidity, financial position and results of operations and we could lose market share to our competitors.

Loss of a significant customer, bankruptcy of a major customer, or the closure of or significant reduction in production at a customer site could have a material adverse effect on our liquidity, financial position and results of operations.

During 2024, the Company’s top five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) together accounted for approximately 12% of our consolidated net sales, with the largest customer accounting for approximately 3% of our consolidated net sales. The loss of a significant customer could have a material adverse effect on our liquidity, financial position and results of operations. Also, a significant portion of our revenues is derived from sales to customers in the cyclical steel, aerospace, aluminum and automotive industries, where bankruptcies have occurred in the past and where companies have periodically experienced financial difficulties. If a significant customer experiences financial difficulties or files for bankruptcy protection, we may be unable to collect on our receivables, customer manufacturing sites may be closed, or our contracts may be voided. The bankruptcy of a major customer could therefore have a material adverse effect on our liquidity, financial position and results of operations. Also, some of our customers, primarily in the steel, aluminum and aerospace industries, often have fewer manufacturing locations compared to other metalworking customers and generally use higher volumes of products at a single location. The loss, closure, or significant reduction in production at one or more of these locations or other major sites of a significant customer could have a material adverse effect on our business.

We may not be able to timely develop, manufacture and gain market acceptance of new and enhanced products required to maintain or expand our business, which could adversely affect our competitive position and our liquidity, financial position and results of operations.

We believe that our continued success depends on our ability to continuously develop and manufacture new products and product enhancements on a timely and cost-effective basis in response to customer demands for higher performance process chemicals and other product offerings. Our competitors may develop new products or enhancements to their products that offer performance, features and lower prices that may render our products less competitive or obsolete, and cause us to lose business and/or significant market share. The development and commercialization of new products require significant expenditures over an extended period of time, and some products that we seek to develop may fail to gain traction or never become profitable. In any event, ongoing investments in research and development for the future do not yield an immediate beneficial impact on our operating results and therefore could result in higher costs without a proportional increase in revenues.

In addition, our customers use our specialty chemicals for a broad range of applications. Changes in our customers’ products or processes or changes in regulatory, legislative or industry requirements may lead our customers to reduce consumption of the specialty chemicals that we produce or make them unnecessary or less attractive. Customers may also adopt alternative materials or processes that do not require our products. Examples of such evolving customer demands and industry trends are the movement towards lighter-weight materials and the growing prevalence of electric vehicles. Should a customer decide to use a different material or technology due to price, performance or other considerations, we may not be able to supply a product that meets the customer’s new requirements. Consequently, it is important that we develop new products to replace the products that mature and decline in use. Despite our efforts, we may not be able to develop and introduce products incorporating new technologies in a timely manner that will satisfy our customers’ future needs or achieve market acceptance. Moreover, new products may have lower margins than the products they replace. Our business, results of operations, cash flows and margins could be materially adversely affected if we are unable to successfully manage the maturation or obsolescence of our existing products and the introduction of new products successfully.

Risks Related to Business Operations, Including Internal and External Factors that May Impact Our Operational Continuity

Our ability to successfully implement our business strategy requires that we effectively and efficiently execute and integrate the acquisitions we identify as strategic as well as successfully divest those operations that are no longer important to that strategy. If we are unsuccessful, we may be unable to achieve our strategic objectives and could also be subject to unanticipated integration costs and claims for indemnification from the buyers of businesses we may divest, all of which could adversely impact our liquidity, financial position and results of operation.

Our business strategy includes making acquisitions and other investments that complement our existing businesses, and based on an evaluation of our business portfolio, sometimes divesting existing businesses that are not important to our strategy. We continually analyze and evaluate acquisition opportunities with the potential to strengthen our industry position, enhance our existing product offerings or deepen our relationships with our customers. We may not successfully identify suitable acquisition candidates or have sufficient financing and/or cash available to successfully complete acquisitions we identify, especially in a competitive sales process.

In addition, strategic acquisitions present operational, financial, and managerial challenges to integration, including diversion of management attention from existing businesses, difficulty with integrating or separating personnel and financial and other systems, increased expenses and raw material costs, assumption of unknown liabilities and indemnities that may not be discovered before an acquisition or fully reflected in the price we pay, and potential disputes with the sellers. If we are unable to consummate such transactions, or successfully integrate and grow completed acquisitions and achieve contemplated revenue synergies and cost savings, our financial condition and results of operations could be adversely affected.

We may also need to finance future acquisitions, and the terms of any financing, and the need to ultimately repay or refinance any indebtedness, may have negative effects on us. Acquisitions also could have a dilutive effect on our financial results. Acquisitions also generally result in goodwill, which would need to be written off against earnings in the future if it becomes impaired. Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses, and expenses.

Further, the success of any acquisition we complete depends on our ability to navigate risks such as those listed above and successfully integrate acquisitions, including, but not limited to, our ability to:

•develop or modify financial reporting, information systems, and other related financial tools to ensure overall financial integrity and adequacy of internal control procedures;

•identify and capitalize on potential synergies, including cost reduction opportunities;

•adequately address challenges arising from the increased scope, geographic diversity and complexity of our operations; and

•further penetrate existing, and expand into new, markets with the products and capabilities acquired in acquisitions.

If we fail to successfully integrate acquisitions into our existing business, our financial condition and results of operations could be adversely affected. We may fail to obtain the benefits we anticipate from our recently completed or future acquisitions or joint ventures and we may not create the appropriate infrastructure to support the additional growth from organic or acquired businesses, which could also have a material adverse effect on our liquidity, financial position and results of operations.

Divestitures have inherent risks, including the possibility that we may not be able to achieve the proceeds we desire from a sale, potential post-closing liabilities and claims for indemnification, that may impact our ability to fully realize the anticipated benefits of a given divestiture. In particular, in connection with the sale of certain properties and businesses, we agreed to indemnify the purchasers for certain types of matters, including certain breaches of representations and warranties, taxes and certain environmental matters. With respect to environmental matters, the discovery of contamination arising from properties that we have divested may expose us to indemnity obligations under the sale agreements with the buyers of such properties or cleanup obligations and other damages under applicable environmental laws, even if we were not aware of the contamination. We may not have insurance coverage for such indemnity obligations. Further, we cannot predict the nature or amount of any indemnity or other obligations we may have to pay. These payments may be costly and may adversely affect our financial position and results of operations. If these or other post-closing risks materialize, the benefits of any divestiture may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted.

Gulf and its wholly-owned subsidiary, QH Hungary Holdings Limited, have a significant minority stake in the Company and the contractual ability to nominate certain directors of the Company, which may enable them to influence the direction of our business and significant corporate decisions.

Gulf and its wholly-owned subsidiary, QH Hungary Holdings Limited (together, the “Gulf Affiliates”), remain our largest shareholders. If they were to make available for sale a portion of their shares, that portion could represent a significant amount of common stock of the Company being sold and any such transaction (if it were to occur) could have an adverse impact on the Company’s stock price or otherwise cause price volatility.

In addition, under our shareholders agreement with the Gulf Affiliates, they currently have the right to designate three individuals for election to the Board and this right, together with their share ownership, gives them substantial influence over our business, including over matters submitted to a vote of our shareholders, including the election of directors, amendment of our organizational documents, acquisitions or other business combinations involving the Company, and potentially the ability to prevent extraordinary transactions such as a takeover attempt or business combination. The concentration of ownership of our shares held by the Gulf Affiliates may make some future actions more difficult without their support. The Gulf Affiliates, however, among other provisions in the shareholders agreement, have agreed that for so long as any of their designees are on the Board, and for six months thereafter, they will vote all Quaker Houghton shares consistent with the recommendations of the Board for each director nominee as reflected in each proxy statement of the Company, including in support of any Quaker Houghton directors nominated for election or re-election to the Board (except as would conflict with their rights to designees on the Board). Nevertheless, the interests of Gulf may conflict with our interests or the interests of our other shareholders, though we are not aware of any such existing conflicts of interest at this time.

The timing and amount of the Company’s share repurchases are subject to a number of uncertainties, and there can be no assurance that we will continue to repurchase shares of our common stock.

On February 28, 2024, the Board approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock. The 2024 Share Repurchase Program replaced an earlier program, was effective immediately and has no expiration date. Under the 2024 Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Company continues to employ trading plans for the repurchase of shares pursuant to the 2024 Share Repurchase Program, which permit the Company to purchase shares, at predetermined price targets, when it may otherwise be precluded from doing so. The 2024 Share Repurchase Program does not obligate us to acquire any particular amount of common stock, and it may be terminated at any time at the Company’s discretion. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. Important factors that could cause the Company to limit, suspend or delay its share repurchases include unfavorable trading market conditions, the price of the Company’s common stock, the nature of other investment opportunities presented to us from time to time, the ability to obtain financing at attractive rates and the availability of U.S. cash, all of which we cannot predict.

Repurchase activities could affect the price of our common stock and increase its volatility. The existence of the 2024 Share Repurchase Program could also cause the price of our common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our common stock. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock could decline below the levels at which we repurchased such shares, as we experienced in 2024. Any failure to repurchase shares after we have announced our intention to do so could negatively impact our reputation and investor confidence in us and could negatively impact our stock price. Although the 2024 Share Repurchase Program is intended to enhance long-term shareholder value, short-term stock price fluctuations could reduce the program’s effectiveness.

Failure to comply with any material provision of our principal credit facility or other debt agreements could have a material adverse effect on our liquidity, financial position and results of operations.

Our principal credit facility requires the Company to comply with certain provisions and covenants and while we do not currently consider these provisions and covenants to be overly restrictive, they could become more difficult to comply with as our business or financial conditions change. We are also subject to interest rate risk due to the variable interest rates within the credit facility and if interest rates rise, interest costs would increase as well.

Our principal credit facility contains provisions that are customary for facilities of its type, including affirmative and negative covenants, financial covenants and events of default, including restrictions on (a) the incurrence of additional indebtedness, (b) investments in and acquisitions of other businesses, lines of business and divisions, (c) the making of dividends or capital stock purchases and (d) dispositions of assets. Other financial covenants contained in our principal credit facility include a consolidated interest coverage test and a consolidated net leverage test. Customary events of default in the credit facility include, among others, defaults for non-payment, breach of representations and warranties, non-performance of covenants, cross-defaults, insolvency, and a change of control of the Company in certain circumstances. If we are unable to comply with the financial and other provisions of our principal credit facility, we could become in default. The occurrence of an event of default under the credit facility could result in all loans and other obligations becoming immediately due and payable and the facility being terminated. In addition, deterioration in the Company’s results of operations or financial position could significantly increase borrowing costs.

Our variable-rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly or result in an inability to obtain sufficient financing on favorable terms. Additionally, rising interest rates could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

We carry, and expect to continue to carry for the foreseeable future, a substantial amount of debt and other fixed obligations. Our ability to satisfy these obligations, finance acquisitions, repurchase shares, and pay dividends rely on our access to capital, which depends in large part on cash flow generated by our business and the availability of debt financing. The Company’s principal credit facility permits interest on certain variable-rate borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk. See Note 19, Debt, to the Consolidated Financial Statements for more information.

Interest rate increases, which we have experienced in the past and may experience again in the future, increase our debt service obligations on the variable-rate indebtedness even though the amount borrowed remains the same, which requires us to use more of our available cash to service our indebtedness. In order to manage the Company’s exposure to variable interest rate risk associated with the Company’s principal credit facility, in the first quarter of 2023, the Company entered into three-year interest rate swaps to convert a portion of the Company’s variable interest rate borrowings to an average fixed rate plus an applicable margin as provided in the Company’s principal credit facility, based on the Company’s consolidated net leverage ratio. These swaps only cover a portion of our variable rate indebtedness. See Note 24, Hedging Activities, to the Consolidated Financial Statements for more information.

Rising interest rates not only increase our cost of capital but could also have a dampening effect on overall economic activity and the financial condition of the Company's customers, either or both of which could negatively affect customer demand for the Company's products and customers' ability to repay their obligations. Rising interest rates could also cause credit market dislocations, which could have an impact on the Company’s and its customers' cost of capital.

Risks Related to our International Operations

Our global presence subjects us to political and economic risks that could adversely affect our business, liquidity, financial position and results of operations.

A significant portion of our revenues and earnings are generated by our non-U.S. operations. Our success as a global business depends, in part, upon our ability to succeed across different legal, regulatory, economic, social and political conditions by developing, implementing and maintaining policies and strategies that are effective in all of the locations where we do business. Risks inherent in our global operations include:

•trade protection measures including import and export controls, trade embargoes, and trade sanctions affecting countries or regions we serve that could result in our losing access to customers and suppliers in those countries or regions;

•unexpected adverse changes in export duties, quotas and tariffs and difficulties in obtaining export licenses;

•termination or substantial modification of international trade agreements that may adversely affect our access to raw materials and to markets for our products;

•our agreements with counterparties in countries outside the U.S. may be difficult for us to enforce and related receivables may take longer or be difficult for us to collect;

•less protective foreign intellectual property laws, and more generally, legal systems that may be less developed and predictable than those in the U.S.;

•limitations on ownership or participation in local enterprises as well as the potential for expropriation or nationalization of enterprises;

•instability in or adverse changes to the economic, political, social, legal or regulatory conditions in a country or region where we do business, as a result of terrorist activities, political disruption and/or military conflict such as those that are being experienced in multiple areas around the world; and

•complex and dynamic local tax regulations, including changes in foreign laws and tax rates or U.S. laws and tax rates with respect to foreign income that may unexpectedly increase the rate at which our income is taxed, impose new and additional taxes on remittances, repatriation or other payments by subsidiaries, or cause the loss of previously recorded tax benefits.

The current global geopolitical and trade environment creates the potential for increased escalation of domestic and international tariffs and retaliatory trade policies, including the possibility of a “trade war” involving the United States and one or more of its trading partners. If tariffs are imposed or increased, materials and goods that U.S. companies import and export may face higher prices, and this could lead to significant shortages or price increases in our raw materials, decreased international sales, reduced margins or increased prices. Changes in U.S. trade policy and retaliatory actions by U.S. trade partners could also result in weakening economic conditions. If we are unable to successfully manage these and other risks associated with our international businesses, the risks could have a material adverse effect on our business, results of operations and financial condition.

The scope of our international operations subjects us to risks from currency fluctuations that could adversely affect our liquidity, financial position and results of operations.

Our non-U.S. operations generate significant revenues and earnings. Fluctuations in foreign currency exchange rates, including hyperinflationary conditions, may affect product demand and may adversely affect the profitability in U.S. dollars of the products and services we provide in international markets where payment for our products and services is made in the local currency. Our financial results are affected by currency fluctuations, particularly between the U.S. dollar and the Euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee. During the past three years, sales by our non-U.S. subsidiaries accounted for approximately 63% to 65% of our consolidated net sales. We generally do not use financial instruments that expose us to significant risk involving foreign currency transactions; however, the relative size of our non-U.S. activities has a significant impact on reported operating results and our net assets. Therefore, as exchange rates change, our results can be materially affected. Incorporated by reference is the foreign exchange risk information contained in Item 7A of this Report and the geographic information in Note 4, Business Segments, to the Consolidated Financial Statements included in Item 8 of this Report.

Also, we occasionally source inventory in a different country than that of the intended sale. This practice can give rise to foreign exchange risk. We seek to mitigate this risk through local sourcing of raw materials in the majority of our locations.

Risks Relating to Our Supply Chain

If we are unable to obtain price increases or contract concessions sufficient to offset increases in the costs of raw materials, this could result in a loss of sales, gross profit, and/or market share and could have a material adverse effect on our liquidity, financial position and results of operations. Conversely, if we fail to adjust prices in a declining raw material cost environment, we could lose sales, gross profit, and/or market share which could have a material adverse effect on our liquidity, financial position and results of operations.

Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, and various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds and various derivatives of the foregoing. The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity. Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, and by biodiesel consumption, which in turn can be affected by the price of crude oil and by government incentives for low-carbon fuels. Accordingly, significant fluctuations in the price of crude oil can have a material impact on the cost of these raw materials. In addition, many of the raw materials used by Quaker Houghton are commodity chemicals which can experience significant price volatility.

We generally attempt to pass through changes in the prices of raw materials to our customers, but we may be unable to do so (or may be delayed in doing so). In addition, raising prices we charge to our customers in order to offset increases in the prices we pay for raw materials could cause us to suffer a loss of sales volumes. Although we have been successful in recovering a substantial amount of raw material cost increases while retaining our customers, there can be no assurance that we will be able to continue to offset higher raw material costs or retain customers in the future. A significant change in margin or the loss of customers due to pricing actions could result in a material adverse effect on our liquidity, financial position and results of operations as described within Item 7 of this Report.

Lack of availability of raw materials and issues associated with sourcing from single suppliers and suppliers in volatile economic environments could have a material adverse effect on our liquidity, financial position and results of operations.

The specialty chemical industry periodically experiences supply shortages for certain raw materials. In addition, we source some materials from a single supplier or from suppliers in jurisdictions that have experienced political or economic instability. Even where we have multiple suppliers of a particular raw material, there are occasionally shortages. Any significant disruption in supply, such as was experienced several years ago, could affect our ability to obtain raw materials or satisfactory substitutes or could increase the cost of such raw materials or substitutes, which could have a material adverse effect on our liquidity, financial position and results of operations. In addition, certain raw materials that we use are subject to various regulatory laws, and a change in our ability to legally use such raw materials may impact the products or services we are able to offer which could negatively affect our ability to compete and could adversely affect our liquidity, financial position and results of operations.

Loss of a significant manufacturing facility or disruptions within our supply chain or in transportation could have a material adverse effect on our liquidity, financial position and results of operations.

Our manufacturing facilities are located throughout the world. While we have some redundant capabilities, if one of our facilities is forced to shut down or curtail operations because of damage or other unforeseen factors, including natural disasters, labor difficulties or public health crises, we may not be able to timely supply our customers. This could result in a loss of sales over an extended period or permanently. While the Company seeks to mitigate this risk through business continuity and contingency planning and other measures, the loss of production in any one region over an extended period of time could have a material adverse effect on our liquidity, financial position and results of operations. Any losses due to these events may not be covered by our existing insurance policies or may be subject to deductibles.

We could be similarly adversely affected by disruptions to our supply chain and transportation network. The Company relies heavily on railroads, ships, and over-the-road shipping methods to transport raw materials to its manufacturing facilities and to transport finished products to customers. The costs of transporting our products could be negatively affected by factors outside of our control, including shipping container shortages or global imbalances in shipping capabilities,port strikes or other labor disruptions, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs, armed conflicts and capacity constraints. Significant delays or increased costs affecting our supply chain could materially affect our liquidity, financial condition and results of operations. Disruptions at our suppliers could lead to increases in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our liquidity, financial condition and results of operations.

Risks Relating to Domestic and Foreign Taxation and Government Regulation and Oversight

Changes in tax laws could result in fluctuations in our effective tax rate and have a material effect on our liquidity, financial position and results of operations.

We pay income taxes in the U.S. and various foreign jurisdictions. Our effective tax rate is derived from a combination of local tax rates and tax attributes applicable to our operations in the various countries, states and other jurisdictions in which we operate. Our effective tax rates and tax liabilities could therefore be materially affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax rates, expiration or lapses of tax credits or incentives, changes in uncertain tax positions, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or in how they are interpreted or enforced, including matters such as transfer pricing. In addition, we are regularly under audit by tax authorities, and the final decisions of such audits could materially affect our current tax estimates and tax positions. See Note 10, Incomes Taxes, and Note 25, Commitments and Contingencies, to the Consolidated Financial Statements in Item 8 of this Report for a discussion of uncertain tax positions, tax years subject to examination, and audits and inspections. Any of these factors or similar tax-related risks could cause our effective tax rate and tax-related payments, including any such payments related to tax liabilities of businesses we have acquired, to significantly differ from previous periods and current or future expectations which could have a material effect on our liquidity, financial position and results of operations.

Pending and future legal proceedings including environmental matters could have a material adverse effect on our liquidity, financial position and results of operations, as well as our reputation in the markets we serve.

The Company and its subsidiaries are routinely party to proceedings, cases, and requests for information from, and negotiations with, various claimants and federal and state agencies relating to various legal matters, including tax and environmental matters. See Note 10, Incomes Taxes, and Note 25, Commitments and Contingencies, to the Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and audits and inspections, as well as information concerning amounts accrued associated with certain environmental remediation costs and other potential commitments or contingencies. An adverse result in one or more pending or ongoing matters or any potential future matter of a similar nature could materially and adversely affect our liquidity, financial position, and results of operations, as well as our reputation in the markets we serve.

Failure to comply with the complex global regulatory environment in which we operate could have an adverse impact on our reputation and/or a material adverse effect on our liquidity, financial position and results of operations.

We are subject to government regulation in all jurisdictions in which we conduct business. Changes in the regulatory environments in which we operate, particularly, but not limited to, the U.S., Mexico, Brazil, China, India, Thailand, Australia, the U.K. and the EU, could lead to heightened regulatory compliance costs and scrutiny, could adversely impact our ability to continue selling certain products in the U.S. or foreign markets, and/or could otherwise increase the cost of doing business. While we seek to mitigate these risks through a variety of actions, including receiving Responsible Care Certification, ongoing employee training, and employing comprehensive environmental, health and safety programs, there is no guarantee these actions will prevent all potential regulatory compliance issues. For instance, failure to comply with the EU’s Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulations or other similar laws and regulations could result in our inability to sell certain products or we could incur fines, ongoing monitoring obligations or other future business consequences, which could have a material adverse effect on our liquidity, financial position and results of operations. In addition, the U.S. Toxic Substances Control Act (“TSCA”) requires chemicals to be assessed against a risk-based safety standard and then requires that unreasonable risks that are identified be eliminated. This regulation and other pending initiatives at the U.S. state level, as well as initiatives in Canada, Asia and other regions, could potentially require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by us. These assessments may result in heightened concerns about the chemicals involved and additional requirements being placed on their production, handling, labeling or use. These concerns and additional requirements could also increase the cost incurred by our customers to use our chemical products and otherwise limit their use which could lead to a decrease in demand for these products. A decrease in demand due to these issues could have an adverse impact on our liquidity, financial position, and results of operations.

Further, we are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and other anti-bribery, anti-corruption and anti-money laundering laws in jurisdictions around the world. These and similar laws generally prohibit companies and their officers, directors, employees and third-party intermediaries, business partners and agents, from making improper payments or providing other improper items of value to government officials or other persons. While we have policies and procedures and internal controls designed to address compliance with such laws, including employee training programs, we cannot guarantee that our employees and third-party intermediaries, business partners and agents will not take, or be alleged to have taken, actions in violation of such policies and laws for which we may be ultimately held responsible. Detecting, investigating and resolving actual or alleged violations can be extensive and require a significant diversion of time, resources and attention from senior management. Any violation of these or other applicable anti-bribery, anti-corruption and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, and criminal or civil sanctions, penalties and fines, any of which could adversely affect our business and financial condition.

The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations. Our import activities are governed by the unique customs laws and regulations in each of the countries where we operate. Moreover, many countries, including the U.S., control the export and re-export of certain goods, services and technology and impose related export record-keeping and reporting obligations, which can be burdensome. Governments may also impose economic sanctions against certain countries, persons and entities that may restrict or prohibit transactions involving such countries, persons and entities, which may limit or prevent our conduct of business in certain jurisdictions.

The laws and regulations concerning import activity, export record-keeping and reporting, export control and economic sanctions are complex and constantly changing. These laws and regulations can cause delays in shipments and unscheduled operational downtime. Moreover, any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions such as fines, imprisonment, debarment from governmental contracts, seizure of shipments and loss of import and export privileges. In addition, investigations by government authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition. We are also subject to the risks that our employees, joint venture partners and agents outside of the U.S. may fail to comply with other applicable laws.

Uncertainty related to environmental regulation and industry standards relating to, as well as physical risks of, climate change and biodiversity loss, could impact our liquidity, financial position, and results of operations.

Increased public and stakeholder awareness of global climate change, biodiversity loss, and other environmental risks have contributed to, and may result in, even more extensive, international, regional and/or federal requirements or industry standards to reduce or mitigate the effects of these changes. These regulations could mandate even more restrictive regulatory or industry standards than the voluntary goals that we have established or require changes to be adopted on a more accelerated time frame. New disclosure requirements have been adopted in the EU and California and additional rule making is expected to be adopted by the SEC. There continues to be a lack of consistent legislation related to disclosure and operational matters, which creates complexity and economic and regulatory uncertainty. Though we are closely following developments in this area and changes in the regulatory landscape in the U.S. and our other markets, we cannot predict how or when those challenges may ultimately impact our business. While certain climate change initiatives may result in new business opportunities for us in the area of alternative fuel technologies and emissions control, compliance with these initiatives may also result in additional costs to us including, among other things, increased production costs, additional taxes and compliance costs, reduced emission allowances or additional restrictions on production or operations.

In addition, the potential physical impacts of climate change and biodiversity loss are highly uncertain. These may include extreme weather events and long-term changes in temperature levels and water availability as well as damaged ecosystems. The physical risks of climate change and biodiversity loss may impact our facilities, customers and suppliers, and the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing. In addition, climate change may increase both the frequency and severity of natural disasters that may affect our business operations.

If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, or our operations are disrupted due to physical impacts of climate change or biodiversity loss, our business, capital expenditures, liquidity, results of operations, financial condition and competitive position could be negatively impacted.

We are subject to stringent labor and employment laws in many jurisdictions in which we operate, and our relationship with our employees could deteriorate which could adversely impact our operations.

A majority of our full-time employees are employed outside the U.S. In many jurisdictions where we operate, labor and employment laws and regulations grant significant job protection to some employees including rights on termination of employment. In addition, in some countries our employees are represented by works councils or are governed by collective bargaining agreements and we are often required to consult with and seek the consent or advice of such representatives. These laws and regulations, together with our obligations to seek consent or consult with the relevant unions or works councils, could have a significant impact on our flexibility in managing costs and responding to market changes. While the Company believes it has generally positive relations with its labor unions and employees, there is no guarantee the Company will be able to successfully negotiate new or renew labor agreements without work stoppages, labor difficulties or unfavorable terms. If we were to experience an extended interruption of operations at any of our facilities because of strikes or other work stoppages, our liquidity, results of operations and financial condition could be materially and adversely affected.

We may be unable to adequately protect our proprietary rights and trade brands, which may limit our ability to compete in our markets and could adversely affect our liquidity, financial position and results of operations.

We have a limited number of patents and patent applications, including patents issued, applied for, or acquired in the U.S. and in various foreign countries, some of which are material to our business. However, we rely principally on our proprietary formulae and the applications know-how and experience to meet customer needs. Also, our products are identified by trademarks that are registered throughout our marketing area. Despite our efforts to protect our proprietary information through patent and trademark filings, and the use of appropriate trade secret protections, it is possible that competitors or other unauthorized third parties may obtain, copy, use, disclose or replicate our formulae, products, and processes. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third-party intellectual property rights. In addition, the laws and/or judicial systems of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our proprietary technology or trade brands. Also, security over our global information technology structure is subject to increasing risks associated with cyber-crime and other related cyber-security threats. These potential risks to our proprietary information, trade brands and other intellectual property could subject us to increased competition and a failure to protect, defend or enforce our intellectual property rights could negatively impact our liquidity, financial position and results of operations.

General Risk Factors

Our business could be adversely affected by environmental, health and safety laws and regulations or by potential product, service or other related liability claims.

The development, manufacture and sale of specialty chemicals and other services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity. Some customers have and may in the future require us to represent that our products conform to certain product specifications provided by them. Any failure to comply with such specifications could result in claims or legal action against us. Any of the foregoing potential product or service risks could also result in substantial and unexpected expenditures and affect customer confidence in our products and services, which could have a material adverse effect on our liquidity, financial position and results of operations.

In addition, our business is subject to hazards associated with the manufacturing, handling, use, storage, and transportation of chemical materials and products, including historical operations at our current and former facilities. These potential hazards could cause personal injury and loss of life, severe damage to, or destruction of, property or equipment and environmental contamination or other environmental damage, which could have an adverse effect on our business, financial condition and results of operations. In the jurisdictions in which we operate, we are subject to numerous U.S. and non-U.S. national, federal, state and local environmental, health and safety laws and regulations, including those governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated properties. We currently use, and in the past have used, hazardous substances at many of our facilities, and we have in the past been, and may in the future be, subject to claims relating to exposure to or contamination caused by hazardous materials. We also have generated, and continue to generate, hazardous wastes at a number of our facilities. Liabilities associated with the investigation and cleanup of hazardous substances, as well as personal injury, property damages or natural resource damages arising from the release of, or exposure to, such hazardous substances, may be imposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that a responsible party may be held liable for more than its share of the losses involved, or even the entire loss). These liabilities may also be imposed on many different entities, including, for example, current and prior property owners or operators, as well as entities that arranged for the disposal of the hazardous substances. The liabilities may be material and can be difficult to identify or quantify. In addition, the occurrence of disruptions, shutdowns or other material operating problems at our facilities or those of our customers due to any of these risks could adversely affect our reputation and have a material adverse effect on our operations as a whole, including our results of operations and cash flows, both during and after the period of operational difficulties.

Further, some of the raw materials we handle are subject to government regulation that affect the manufacturing processes, handling, uses and applications of our products. In addition, our production facilities and a number of our distribution centers require numerous operating permits. Due to the nature of these requirements and changes in our operations, our operations may exceed limits under permits or we may not have the proper permits to conduct our operations.

Ongoing compliance with environmental laws, regulations and permits that impact registration/approval requirements, transportation and storage of raw materials and finished products, and storage and disposal of wastes could require us to make changes in manufacturing processes or product formulations and could have a material adverse effect on our results of operations. We may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations, including as a result of revocation, non-renewal or modification of the Company’s operating permits and revocation of the Company’s product registrations, for violations arising under these laws or permit requirements. Any such revocation, modification or non-renewal may require the Company to cease or limit the manufacture and sale of its products at one or more of its facilities, which may limit or prevent the Company’s ability to meet product demand or build new facilities and may have a material adverse effect on liquidity, financial position, and results of operations. Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites, and additional sites may be identified for which we are alleged to be liable, which could cause us to materially increase our environmental accrual or the upper range of the costs we believe we could reasonably incur for such matters. Increased compliance costs may not affect competitors in the same way that they affect us due to differences in product formulations, manufacturing locations or other factors, and we could be at a competitive disadvantage, which might adversely affect our financial performance.

Our insurance may not fully cover all potential exposures.

We maintain product, property, business interruption, casualty, and other general liability insurance, but this may not cover all risks associated with the hazards of our business and these coverages are subject to limitations, including deductibles and coverage limits. We may incur losses beyond the limits, or outside the coverage, of our insurance policies, including liabilities for environmental remediation. In addition, from time to time, various types of insurance for companies in the specialty chemical industry have not been available on commercially acceptable terms and, in some cases, have not been available at all. We are potentially at additional risk if one or more of our insurance carriers fail. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some of our insurers. Future downgrades in the ratings of insurers could adversely impact both the availability of appropriate insurance coverage and its cost. In the future, we may not be able to obtain coverage at current levels, if at all, and our premiums may increase significantly on coverage that we maintain.

Impairment evaluations of goodwill, intangible assets, investments or other long-lived assets could result in a reduction in our recorded asset values, which could have a material adverse effect on our financial position and results of operations.

We perform reviews of goodwill and indefinite-lived intangible assets on an annual basis, or more frequently if triggering events indicate a possible impairment. We test goodwill at the reporting unit level by comparing the carrying value of the net assets of the reporting unit, including goodwill, to the reporting unit's fair value. Similarly, we test indefinite-lived intangible assets by comparing the fair value of the assets to their carrying values. If the carrying values of goodwill or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets would be considered impaired. In addition, we perform a review of a definite-lived intangible assets or other long-lived assets when changes in circumstances or events indicate a possible impairment. If any impairment or related charge is warranted, as we determined to be the case in the fourth quarter of 2022 when we recognized a $93.0 million impairment charge related to our EMEA reportable segment, then our financial position and results of operations could be materially affected. See Note 15, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements included in Item 8 of this Report.

If we identify a material weakness in internal control over financial reporting, or if we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud, either of which could have a material effect on us.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. We cannot be certain that we will be successful in maintaining adequate internal control over financial reporting and financial processes. We may in the future discover areas of our internal controls that need improvement. Furthermore, to the extent our business grows or significantly changes, our internal controls may become more complex, and we could require significantly more resources to ensure our internal controls remain effective. If we identify material weaknesses in the future, it could negatively impact our operations or the market value of our common stock. Additionally, the existence of any material weakness may require management to devote significant time and incur significant expense to remediate any such material weaknesses and management may not be able to remediate any such material weaknesses in a timely manner.

Disruption of critical information systems or material breaches in the security of our systems could adversely affect our business and our customer relationships and subject us to fines or other regulatory actions.

We rely on information technology systems, digital telecommunications and other computer resources to obtain, process, analyze, manage, transmit, and store electronic information in our day-to-day operations. We also rely on our technology infrastructure in all aspects of our business, including to interact with customers and suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, and fulfill contractual obligations. Further, we rely on our vendors and third-party service providers to maintain effective cybersecurity measures to keep our information secure. Our information technology systems are subject to potential disruptions, including significant network or power outages, usage errors by our employees, business partners, or outside service providers, cyberattacks, ransomware attacks, computer viruses, other malicious codes, and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations. Security breaches could result in unauthorized disclosure of confidential information or personal data belonging to our employees, partners, customers or suppliers for which we may incur liability. Cyberattacks and other security threats could originate from a wide variety of external sources, including cyber-criminals, nation-state hackers, hacktivists and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders, such as employees, and other business partners and outside service providers. Cybersecurity threats, attempted intrusions and other incidents, such as these, are becoming more sophisticated and frequent. Security breaches and cyber incidents have, from time to time, occurred and may occur in the future. Although the breaches and cyber incidents experienced to date have not had a material impact, there can be no assurance that our protective measures will prevent security breaches that could have a significant impact on our business, reputation and financial results. Additionally, the costs to combat cyber or other security threats can be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions. Media or other reports of perceived vulnerabilities in our network security, regardless of their immediacy or accuracy, could adversely impact our reputation and materially affect our business and financial results. While we have implemented security measures and internal controls designed to protect against cyber and other security threats, such measures cannot provide absolute security and may not be successful in preventing future security breaches.

We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign legislatures and governmental agencies in various countries in which we operate, including the EU General Data Protection Regulation. Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate or could otherwise affect our business operations.

In addition, some U.S. state governments have enacted or are considering enacting more stringent laws and regulations protecting personal information and data. For instance, California passed the California Consumer Privacy Act of 2018, (“CCPA”), which went into effect in January 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as for private rights of action for certain data breaches that result in the loss of personal information. In addition, the California Consumer Rights Act (“CPRA”) was recently enacted to strengthen elements of the CCPA and became effective January 1, 2023. A number of other states have considered similar privacy proposals, with states like Virginia and Colorado enacting their own privacy laws. These privacy laws and the evolving regulatory environment related to personal data may impact our business activities, and while we carry cyber insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

Breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy by us, our vendors and third-party service providers could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation. Therefore, a failure to monitor, maintain or protect our information technology systems and data integrity effectively or to anticipate, plan for and recover from significant disruptions to these systems could have a material adverse effect on our results of operations or financial condition.

Our business depends on attracting and retaining qualified management and other key personnel.

Due to the specialized and technical nature of our business, our future performance is dependent on our ability to attract, develop and retain qualified leadership, commercial, technical, and other key personnel. Competition for such talent is intense and has further increased in light of evolving labor and employment trends, including the increase in remote, hybrid or other alternative flexible work arrangements and, in many jurisdictions, laws and regulations aimed at limiting or eliminating the enforceability of non-competition and other restrictive covenants with employees. In the current labor and employment environment, we may be unable to continue to attract or retain such personnel. In an effort to mitigate such risks, the Company utilizes retention bonuses, offers competitive total rewards and maintains continuous succession planning, including for our senior executive officers. However, there can be no assurance that these mitigating factors will be adequate to attract or retain qualified management or other key personnel. Failure to retain key employees, failure to effectively implement our succession planning efforts and successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business.

Increasing scrutiny and changing expectations from stakeholders with respect to our Environmental, Social and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.

Companies across all industries are facing increasing scrutiny from stakeholders related to their ESG practices. Investor advocacy groups, institutional investors, investment funds, and other influential parties are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. Regardless of the industry, investors’ increased focus and activism related to ESG and similar matters may impact access to capital, as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices.

We face pressures from certain stakeholders to prioritize and promote sustainable practices and reduce our carbon footprint. Our stakeholders may pressure us to implement ESG procedures or standards beyond those we have in place in order to continue engaging with us, to remain invested in us, or before they will make further investments in us. Additionally, we may face reputational challenges in the event our ESG procedures or standards do not meet the standards set by certain constituencies. We have adopted certain practices as highlighted in the Company’s Sustainability Report, including with respect to environmental stewardship. The Company’s Sustainability Report is published annually and is available on the Company’s corporate website at home.quakerhoughton.com/sustainability.

Further, as we work to align with the recommendations of recognized third-party frameworks, we continue to expand our disclosures in these areas. This is consistent with our commitment to executing on a strategy that reflects the economic, social, and environmental impact we have on the world while advancing and complementing our business strategy. Our disclosures on these matters and standards we set for ourselves or a failure to meet these standards, may influence our reputation and the value of our brand. It is possible that our stakeholders might not be satisfied with our ESG efforts or the speed of their adoption. If we do not meet our stakeholders’ expectations, our business and/or our ability to access capital could be harmed. Any harm to our reputation resulting from setting these standards or our failure or perceived failure to meet such standards could adversely affect our business, financial performance, and growth.

Additionally, adverse effects upon our customers’ industries related to the worldwide social and political environment may also adversely affect demand for our services. This includes the uncertainty or instability resulting from climate change or biodiversity loss, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change or biodiversity loss, and investors’ expectations regarding ESG matters. Any long-term material adverse effect on our customers or their industries could have a significant financial and operational adverse impact on our business.

Legislation requiring disclosure related to ESG matters is increasingly being adopted by governments in various jurisdictions, including the EU and California, which requirements are expected to be applicable to us or certain of our operations and which impose varying and differing requirements. These developing requirements can significantly expand climate and other sustainability related disclosure requirements, which could require substantial time and attention of management and financial resources. Additionally, we could be subjected to negative responses by governmental actors, such as anti-ESG legislation, which could have a material adverse effect on our business, liquidity, financial position, and results of operations. We are closely monitoring these developments.

Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon events may affect the markets in which we operate and our profitability which could adversely affect our business, liquidity, financial position, and results of operations.

Terrorist attacks, other acts of armed conflicts or war, cyber-attacks, natural disasters, widespread public health crises or an outbreak of a contagious disease, or other uncommon global events, such as the current military conflicts between Russia and Ukraine and in the Middle East, as well as responses to such events including sanctions, boycotts, protests or other restrictive actions by the United States and/or other countries or its residents, may negatively affect our operations. There can be no assurance that there will not be terrorist attacks against the U.S. or other locations where we do business. Also, natural disasters such as earthquakes, tornados, hurricanes, fires, floods, and tsunamis cannot be predicted.

Terrorist attacks, other acts of armed conflicts or war, cyber-attacks, and natural disasters, which may be amplified by ongoing global climate change and biodiversity loss, may directly impact our physical facilities and/or those of our suppliers or customers. In addition, terrorist attacks or natural disasters may disrupt the global insurance and reinsurance industries with the result that we may not be able to obtain insurance at historical terms and levels, if at all, for all of our facilities. In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive. Widespread public health crises, including contagious diseases, could also disrupt operations of the Company, its suppliers and customers which could have a material adverse impact on our results of operations. A significant outbreak of contagious diseases in the human population similar to the COVID-19 pandemic could also result in an economic downturn that could affect demand for our products and likely impact our operating results. To the extent that the Company’s customers and suppliers are materially and adversely impacted by a widespread outbreak of contagious disease, this could reduce the availability, or result in delays, of materials or supplies to or from the Company, which in turn could materially interrupt the Company’s business operations.

The consequences of terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises or other uncommon global events can be unpredictable, and we may not be able to foresee or effectively plan for these events, resulting in a material adverse effect on our business, liquidity, financial position, and results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

The Company is subject to various cybersecurity risks that could adversely affect our business, financial condition, and results of operations, including intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy laws and other litigation and legal risk; and reputational risk. Refer to the “Risk Factors” section, which appears in Item 1A of this Report for more information regarding these risks. In response to these risks, we have implemented cybersecurity processes, technologies, and controls detailed below to aid in our efforts to assess, identify, and manage cybersecurity risks. Our Global Cyber Security team works to identify, assess and manage cybersecurity threat risks, their severity, and potential mitigations.

As of the date of this report, we are not aware of any risks from cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition, individually or in the aggregate.

Governance

The Board, primarily through the Audit Committee, oversees management's approach to managing cybersecurity risks. Management provides cybersecurity updates to the Audit Committee, at least quarterly, and material cybersecurity incidents are reported to the Board.

Quaker Houghton has a dedicated Global Cyber Security team led by the Senior Director, Cybersecurity and Compliance that is responsible for identifying, assessing, monitoring, managing and communicating the Company’s cybersecurity risks. Collectively this team has decades of dedicated cybersecurity experience with personnel experienced and certified in various disciplines, including data security and privacy, enterprise risk management, cloud security and ethical hacking.

The Global Cyber Security team reports to the Chief Digital Information Officer (“CDIO”), who in turn reports to the Chief Executive Officer (“CEO”). Refer to the “Information about our Executive Officers” section, which appears in Item 4(a) of this report for more information about the CDIO’s relevant professional experience and qualifications.

Risk Management and Strategy

Key cybersecurity risks are incorporated into our enterprise risk management framework. Our cybersecurity risk management program leverages the National Institute of Standards and Technology (“NIST”) framework, which organizes cybersecurity risk management actions into six categories: govern, identify, protect, detect, respond, and recover. The Company’s cybersecurity risk management program and strategy includes the following:

•Cybersecurity Operations Centers - We, along with certain third-parties, operate several global cybersecurity operations centers, which provide 24/7 monitoring and incident response capabilities. In the event of an alert, our cybersecurity operations centers coordinate the investigation and remediation of such alerts.

•Partnerships with Cybersecurity Companies-We partner with specialized cybersecurity companies and organizations, leveraging third-party technology and expertise. These partnerships help monitor and maintain the performance and effectiveness of our cybersecurity tools and program.

•Annual and Periodic Assessments by Third Parties- Our cyber risk management program undergoes periodic assessments by third parties including annual penetration and disaster recovery tests.

•Policies and Training - We maintain company-wide policies and procedures concerning cybersecurity, which are reviewed and approved by appropriate management members. All employees are required to complete cybersecurity training periodically, with additional specialized trainings for certain roles. We conduct monthly phishing simulation exercises with mandatory training on failure.

•Incident Response- In case of a cybersecurity incident, we follow a documented incident response process, which outlines steps from detection to mitigation, recovery, and notification, including notifying senior leadership and the Board as appropriate based on severity.

•Third-Party Service Providers - In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers. We assess third party cybersecurity controls through a cybersecurity questionnaire and include security and privacy addendums to our contracts where applicable.

Item 2. Properties.

Quaker Houghton’s corporate headquarters and a laboratory facility are located in Conshohocken, Pennsylvania. The laboratory facility is within the Americas’ segment. The Company’s other principal facilities in its Americas’ segment are located in Santa Fe Springs, California; Carrollton, Georgia; Aurora, Illinois; Zion, Illinois; Detroit, Michigan; Madison Heights, Michigan; Batavia, New York; Cleveland, Ohio; Dayton, Ohio; Middletown, Ohio; Strongsville, Ohio; Lewisburg, Tennessee; Waterloo, Ontario; Monterrey, N.L., Mexico; Rio de Janeiro, Brazil and Sao Paulo, Brazil. The Company’s EMEA segment has principal facilities in Uithoorn, the Netherlands; Dortmund, Germany; Monheim am Rhein, Germany; Barbera, Spain; Bera, Spain; Santa Perpetua de Mogoda, Spain; Karlshamn, Sweden; Moncalieri, Italy; Coventry, U.K; Broms Grove, U.K, and Saint-Donat, France. The Company’s Asia/Pacific segment operates out of its principal facilities located in Chongqing, China; Qingpu, China; Shanghai, China; Songjiang, China; Dahej, India; Rayong, Thailand; Moorabbin, Australia; Perth, Australia, and Gamagori, Japan.

With the exception of the Conshohocken, Santa Fe Springs, Madison Heights, Lewisburg, Monheim am Rhein, Aurora, Karlshamn, Songjiang, Rayong, and Coventry sites, which are leased, the remaining principal facilities are owned by the Company and, as of December 31, 2024, were mortgage free. Quaker Houghton also leases sales, laboratory, manufacturing, and warehouse facilities in other locations.

Quaker Houghton’s principal facilities consist of various manufacturing, administrative, warehouse, and laboratory buildings. Most locations have raw material storage tanks, ranging from 1 to 155 at each location with capacities ranging from 300 to 70,000 gallons, and processing or manufacturing vessels ranging from 1 to 54 at each location with capacities ranging from 2 to 29,000 gallons.

Each of Quaker Houghton’s non-U.S. associated companies (in which it owns a 50% or less interest and has significant influence) owns or leases a plant and/or sales facilities in various locations, with the exception of Primex, Ltd.

Item 3. Legal Proceedings.

The Company is a party to proceedings, cases, and requests for information from, and negotiations with, various claimants and Federal and state agencies relating to various matters, including environmental matters. For information concerning pending certain environmental non-capital remediation costs and other legal-related matters, refer to Note 25, Commitments and Contingencies, to the Consolidated Financial Statements. The Company is a party to other litigation which management currently believes will not have a material adverse effect on the Company’s results of operations, cash flow or financial condition.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 4(a). Information about our Executive Officers.

Our executive officers as of February 24, 2025 are listed below with their respective ages, positions currently held at the Company, and principal occupation and business experience during at least the last five years. Each of the executive officers, with the exception of Jeffrey Kutz, is appointed annually to a one-year term. Mr. Kutz is considered an executive officer in his capacity as principal accounting officer for purposes of this Item 4(a).

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol KWR. The Board declared cash dividends that totaled $1.88 per share of outstanding common stock or $33.6 million during the year ended December 31, 2024 and $1.78 per share of outstanding common stock or $32.0 million during the year ended December 31, 2023. In February and May 2024, our Board declared quarterly cash dividends of $0.455 per share of outstanding common stock, payable to shareholders of record in April 2024 and July 2024, respectively. Subsequently, our Board declared quarterly dividends of $0.485 per share of outstanding common stock in July and November 2024, payable to shareholders of record in October 2024 and January 2025, respectively. We currently expect to continue paying comparable cash dividends on a quarterly basis in the future. Future declaration of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board, and will be based on our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board may deem relevant.

There are currently no restrictions on the Company’s ability to pay dividends. However, in the event that our net leverage ratio were to rise above 2.5x, certain restrictions would apply. Refer to the description of the Company’s primary Credit Facility in Note 19, Debt, to the Consolidated Financial Statements in Item 8 of this Report for more information about the covenants.

As of January 17, 2025, 17,673,437 shares of Quaker common stock were issued and outstanding and were held by 549 shareholders of record. Each share of common stock is entitled to one vote per share.

Reference is made to the information in Item 12 of this Report under the caption “Equity Compensation Plans,” which is incorporated herein by this reference.

The following table sets forth information concerning shares of the Company’s common stock acquired by the Company during the fourth quarter of 2024 for the period covered by this report:

Issuer Purchases of Equity Securities

(1)3,712 of these shares were acquired from employees related to the surrender of shares in payment of the vesting of restricted stock awards or units. The price paid for shares acquired from employees pursuant to employee benefit and equity compensation plans is based on the closing price of the Company’s common stock on the date of vesting as specified by the plan pursuant to which the applicable option, restricted stock award, or restricted stock unit was granted.

(2)On February 28, 2024, the Board of Directors of the Company approved, and the Company announced, a share repurchase program, pursuant to which the Company is authorized to repurchase up to $150 million of Quaker Chemical Corporation common stock (“2024 Share Repurchase Program”), which replaced a prior authorization and has no expiration date. The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions. See Note 8, Equity, to the Consolidated Financial Statements for more information.

Stock Performance Graph

The following graph compares the cumulative total return (assuming reinvestment of dividends) from December 31, 2019 to December 31, 2024 for (i) Quaker’s common stock, (ii) the S&P MidCap 400 Index (the “MidCap Index”), (iii) the S&P 400 Materials Group Index (the “Materials Group Index”) and (iv) S&P Composite 1500 Chemicals Index (the “Chemicals Index”), the new published industry index we have selected to use. The graph assumes the investment of $100 on December 31, 2019 in each of Quaker’s common stock, the stocks comprising the MidCap Index, Materials Group Index and the Chemicals Index, respectively. We included the Chemicals Index this year because the Chemicals Index was also the peer group used to assess the 2024 performance stock unit’s total shareholder return relative to the performance of our peer group.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As used in this Annual Report on Form 10-K (the “Report”), the terms “Quaker Houghton,” the “Company,” “we,” and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires.

Executive Summary

Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, our customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies. Our high-performing, innovative and sustainable solutions are backed by best-in-class technology, deep process knowledge, and customized services. Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near Philadelphia in the U.S.

Net sales of $1,839.7 million in 2024 decreased 6% compared to $1,953.3 million in 2023, primarily due to a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of approximately 2%, and an unfavorable impact from foreign currency translation of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 1%. The decrease in selling price and product mix was attributable to the impact of our index-based customer contracts and the mix of products and services. The decline in sales volumes was primarily a result of the continuation of soft end market conditions compared to the prior year in the Americas and Europe, Middle East and Africa (“EMEA”) segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

The Company generated net income of $116.6 million or $6.51 per diluted share in 2024, compared to a net income of $112.7 million or $6.26 per diluted share in 2023. The increase in current year earnings was primarily driven by lower interest expense and lower foreign exchange losses, partially offset by lower operating income. Excluding non-recurring and non-core items, the Company’s current year non-GAAP net income and non-GAAP earnings per diluted share were $133.5 million and $7.44, respectively, compared to $137.6 million and $7.65, respectively, in 2023. The decrease in current year non-GAAP earnings was primarily driven by a decrease in net sales, partially offset by an improvement in gross margins, lower interest expense, and an increase in other income (expense), net. The Company generated adjusted EBITDA of $310.9 million compared to $320.4 million in 2023, a decrease of 3%. The decrease in adjusted EBITDA was primarily a result of a decrease in net sales, partially offset by an increase in other income (expense), net. See the Non-GAAP Measures section of this Item below.

The Company’s 2024 operating performance in the Americas and EMEA reportable segments reflect similar drivers to that of the Company’s consolidated performance. Operating earnings for the Americas and EMEA segments decreased compared to the prior year, primarily driven by a decrease in net sales, partially offset by an increase in segment operating margins. Asia/Pacific segment operating earnings increased compared to the prior year, primarily driven by an increase in net sales, partially offset by a decrease in segment operating margins. Additional details of each segment’s operating performance are further discussed in the Company’s reportable segments review, in the Operations section of this Item 7, below.

Net cash flows provided by operating activities were $204.6 million in 2024 compared to $279.0 million in 2023. The decrease in net operating cash flows was primarily driven by a reduction in cash inflow from working capital in the current year. The key drivers of the Company’s operating cash flow and overall liquidity are further discussed in the Company’s Liquidity and Capital Resources section of this Item 7, below.

Overall, the Company’s results in 2024 reflect the Company’s continued execution on its financial and operational priorities despite a continuation of soft end market conditions that have impacted the Company’s customers. Looking ahead to 2025, we believe Quaker Houghton is well positioned to continue to deliver above market growth rates through new business wins, by delivering value-added solutions and services to its customers. The Company expects to continue to advance its enterprise growth strategy, including investing in its long-term growth initiatives, further strengthening its focus on customer intimacy, progressing with its sustainability program and positioning the Company to deliver earnings growth in 2025 and beyond.

Critical Accounting Policies and Estimates

Quaker Houghton’s discussion and analysis of its financial condition and results of operations are based on its consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer sales incentives, product returns, credit losses, inventories, property, plant and equipment (“PP&E”), investments, goodwill, intangible assets, income taxes, business combinations, and restructuring. These estimates reflect historical experience as well as our best judgment about current and/or future economic and market conditions and their effects and various other assumptions that are believed to be reasonable based on currently available information, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, actual results may differ materially from these estimates under different assumptions or conditions.

Quaker Houghton believes the following critical accounting policies describe the more significant judgments and estimates used in the preparation of its consolidated financial statements:

Accounts receivable and inventory exposures: The Company establishes allowances for credit losses for estimatedlosses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As part of our terms of trade, we may custom manufacture products for certain large customers and/or may ship products on a consignment basis. Further, a significant portion of our revenue is derived from sales to customers in industries where companies have previously experienced financial difficulties. If a significant customer bankruptcy occurs, then we must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process. These matters may increase the Company’s exposure should a bankruptcy occur and may require a write down or a disposal of certain inventory as well as the failure to collect receivables. Reserves for customers filing for bankruptcy protection are established based on a percentage of the amount of receivables outstanding at the bankruptcy filing date. However, initially establishing this reserve and the amount thereof is dependent on the Company’s evaluation of likely proceeds to be received from the bankruptcy process, which could result in the Company recognizing minimal or no reserve at the date of bankruptcy. We generally reserve for large and/or financially distressed customers on a specific review basis, while a general reserve is maintained for other customers based on historical experience. The Company’s consolidated allowance for credit losses was $13.6 million and $13.3 million as of December 31, 2024 and 2023, respectively. The Company recorded expense to increase its provision for credit losses by $2.1 million, $1.3 million and $4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Tax exposures, uncertain tax positions and valuation allowances: The Company records expenses and liabilities for taxesbased on estimates of amounts that will be determined as deductible or taxable in tax returns filed in various jurisdictions. The filed tax returns are subject to audit, which often occur several years subsequent to the date of the financial statements. Disputes or disagreements may arise during audits over the timing or validity of certain items, such as taxable income or deductions, which may not be resolved for extended periods of time. The Company also evaluates uncertain tax positions on all income tax positions taken on previously filed tax returns or expected to be taken on a future tax return in accordance with FIN 48, which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return and, also, whether the benefits of tax positions are probable or if they are more likely than not to be sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not to be sustained upon audit, the Company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, the Company does not recognize any portion of the benefit in its financial statements. In addition, the Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Also, the Company nets its liability for unrecognized tax benefits against deferred tax assets related to net operating losses or other tax credit carryforward on the basis that the uncertain tax position is settled for the presumed amount at the balance sheet date.

The Company also records valuation allowances when necessary to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and assesses the need for a valuation allowance, in the event Quaker Houghton were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. Both determinations could have a material impact on the Company’s financial statements.

Pursuant to the Tax Cuts and Jobs Act (“U.S. Tax Reform”), the Company recorded a $15.5 million transition tax liability for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries. As of December 31, 2024, $11.6 million in installments have been paid with the remaining $3.9 million to be paid in 2025. However, the Company may also be subject to other taxes, such as withholding taxes and dividend distribution taxes, if certain undistributed earnings are ultimately remitted to the U.S. As of December 31, 2024, the Company has a deferred tax liability of $8.4 million, which primarily represents the estimate of the non-U.S. taxes the Company will incur to remit certain previously taxed earnings to the U.S. It is the Company’s current intention to reinvest its future undistributed earnings of non-U.S. subsidiaries to support working capital needs and certain other growth initiatives outside of the U.S. The amount of such undistributed earnings at December 31, 2024 was approximately $359.8 million. Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations), however, certain withholding taxes could apply. It is currently impractical to estimate any such incremental tax expense. See Note 10, Income Taxes, to the Consolidated Financial Statements for more information.

Goodwill and other intangible assets: The Company accounts for business combinations under the acquisition method ofaccounting. This method requires the recording of acquired assets, including separately identifiable intangible assets, at their acquisition date fair values. Any excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill. The determination of the estimated fair value of assets acquired requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to projected revenue growth rates, gross margins, and operating margins, the weighted average cost of capital (“WACC”), royalty rates, asset lives and market multiples, among other items. When necessary, the Company consults with external advisors to help determine fair value. For non-observable market values, the Company may determine fair value using acceptable valuation principles, including the excess earnings, relief from royalty, lost profit or cost methods.

The Company amortizes definite-lived intangible assets on a straight-line basis over their useful lives. Goodwill and intangible assets that have indefinite lives are not amortized and are required to be assessed at least annually for impairment. The Company completes its annual goodwill and indefinite-lived intangible asset impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment. The Company’s consolidated goodwill at December 31, 2024 and 2023 was $518.9 million and $512.5 million, respectively. As of December 31, 2024 and 2023, the Company had indefinite-lived intangible assets for trademarks and intangibles totaling $185.3 million and $193.2 million, respectively.

During the fourth quarter of 2022, the Company recorded a non-cash impairment charge of $93.0 million to write down the carrying value of the EMEA reporting unit goodwill to its estimated fair values. In connection with the Company’s reorganization and the associated change in reportable segments and reporting units during the first quarter of 2023, the Company performed the required impairment assessments directly before and immediately after the change in reporting units and concluded that it was not more likely than not that the fair values of any of the Company’s previous or new reporting units were less than their respective carrying amounts. Additionally, the Company completed its annual impairment assessment as of October 1, 2023 and October 1, 2024 and concluded in each case that no impairment existed.

In completing the annual impairment assessment, the Company used a WACC assumption of approximately 10.5% and holding all other assumptions constant, the WACC would have to increase by approximately 2.6 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired. In addition, holding EBITDA margins and all other assumptions constant, the Company’s compound annual revenue growth rate during the entire projection period would need to decline by approximately 1.9 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired. Similarly, holding revenue growth rates and all other assumptions constant, the Company’s average EBITDA margins throughout the discreet projection period would need to decline by approximately 9.8 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.

The Company continually evaluates financial performance, economic conditions and other recent developments in assessing if a triggering event indicates that the carrying value of goodwill, indefinite-lived, or long-lived assets might be impaired. Notwithstanding the results of the Company’s impairment assessments during 2023 and 2024, if the Company is unable to maintain the actions aimed at improving the financial performance of the EMEA reporting unit, or interest rates rise, which leads to an increase in the cost of capital, then these conditions could result in a triggering event for the EMEA reporting unit. This assessment could result in an impairment of the EMEA reporting unit’s remaining goodwill, indefinite-lived intangible assets, or long-lived assets. See Note 15, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements for more information.

Pension and Postretirement benefits: The Company provides certain defined benefit pension and other postretirement benefitsto current employees, former employees and retirees. Independent actuaries, in accordance with U.S. GAAP, perform the required valuations to determine benefit expense and, if necessary, non-cash charges to equity for additional minimum pension liabilities. Critical assumptions used in the actuarial valuation include the weighted average discount rate, which is based on applicable yield curve data, including the use of a split discount rate (spot-rate approach) for the U.S. plans and certain foreign plans, rates of increase in compensation levels, and expected long-term rates of return on assets.

Recently Issued Accounting Standards

See Note 3, Recently Issued Accounting Standards, to the Consolidated Financial Statements for more information for a discussion regarding recently adopted accounting standards and recently issued accounting standards not yet adopted.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $188.9 million and $194.5 million at December 31, 2024 and 2023, respectively. Cash held by subsidiaries in foreign countries was approximately $180.6 million and $177.1 million at December 31, 2024 and 2023, respectively. The $5.6 million decrease in cash and cash equivalents was the net result of $204.6 million of cash provided by operating activities, largely offset by $122.7 million of cash used in financing activities, $76.4 million of cash used in investing activities, and an unfavorable impact of foreign currency translation of approximately $11.1 million.

Net cash flows provided by operating activities were $204.6 million in 2024 compared to $279.0 million in 2023. The decrease in net operating cash flow year-over-year reflects a decrease in cash inflow from working capital, notably due to an approximately $53.0 million decrease in cash flow associated with inventory, as inventory purchases returned to normalized levels after inventory reductions in 2023 due to customer destocking.

Net cash flows used in investing activities were $76.4 million in 2024 compared to $27.6 million in 2023. The increase in cash used in investing activities year-over-year is primarily the result of $39.3 million of payments in the current year related to the acquisitions of the Sutai Group (“Sutai”) and I.K.V. Tribologie IKVT and its subsidiaries (“IKV”), a $3.0 million increase in capital expenditures, and a reduction of proceeds from asset dispositions of $6.5 million. See Note 2, Business Combinations, to the Consolidated Financial Statements for further information about business acquisitions.

Net cash flows used in financing activities were $122.7 million in 2024 compared to $238.6 million in 2023. The decrease in net cash outflows was primarily related to $17.9 million of net borrowings on the Company’s revolving credit facility in the current year compared to $164.8 million of net repayments in the prior year. This was offset by payments of approximately $49.2 million for repurchases of the Company’s common stock under its share repurchase program in the current year and payments of $57.2 million to reduce long-term debt in the current year, an $18.3 million increase compared to the prior year. In addition, the Company paid $33.2 million of cash dividends to shareholders during 2024, a $1.5 million increase compared to the prior year.

During June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S. Dollar swing line lender and letter of credit issuer, Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders entered into an amendment to its primary credit facility (the “ Original Credit Facility”). The amended credit facility (“Credit Facility”) established (A) a new $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a new $600.0 million senior secured term loan (the “U.S. Term Loan”), and (C) a new $500.0 million senior secured revolving credit facility (the “Revolver”), each maturing in June 2027. The Company has the right to increase the amount of the Credit Facility by an aggregate amount not to exceed the greater of $300.0 million or 100% of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase. In addition, the Credit Facility also:

(i) eliminated the requirement that material foreign subsidiaries must guaranty the Original Euro Term Loan;

(ii) replaced the U.S. Dollar borrowings reference rate from LIBOR to SOFR;

(iii) extended the maturity date of the Original Credit Facility from August 2024 to June 2027; and

(iv) effected other less significant changes to the Original Credit Facility.

As of December 31, 2024, the Company had Credit Facility borrowings outstanding of $696.5 million. The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.8 million as of December 31, 2024. Total unused capacity under these arrangements as of December 31, 2024 was approximately $32.9 million. The Company’s total net debt as of December 31, 2024 was $519.4 million, which consists of total borrowings of $708.3 million less cash and cash equivalents of $188.9 million. The Credit Facility contains affirmative and negative covenants, financial covenants and events of default. Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test. As of December 31, 2024, the Company was in compliance with all of the Credit Facility covenants. Refer to the description of the Company’s primary Credit Facility in Note 19, Debt, to the Consolidated Financial Statements for more information about the covenants and events of default.

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the twelve months ended December 31, 2024 was approximately 6.1%. As of December 31, 2024, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.2%. As part of the Credit Facility, the Company is required to pay an annual commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio. The Company had unused capacity under the Revolver of approximately $448.7 million, which is net of bank letters of credit of approximately $2.4 million, as of December 31, 2024.

In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three-year interest rate swaps to convert a portion of the Company’s variable rate borrowings into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio. As of December 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%. See Note 24, Hedging Activities, to the Consolidated Financial Statements for more information.

In connection with executing the Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $6.8 million in Other income (expense), net on the Consolidated Statement of Operations during the year ended December 31, 2022. The loss on extinguishment of debt included the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Credit Facility. The Company capitalized third-party and credit debt issuance costs attributed to the Euro Term Loan, U.S. Term Loan and Revolver in connection to the amended Credit Facility during the second quarter of 2022. Capitalized costs attributed to the Euro Term Loan and U.S. Term Loan are recorded as a direct offset to Long-term debt on the Consolidated Balance Sheets. Capitalized costs attributed to the Revolver are recorded within Other assets on the Consolidated Balance Sheets. These capitalized costs will collectively be amortized into Interest expense over the five year term of the Credit Facility. As of December 31, 2024 and 2023, the Company had $1.1 million and $1.5 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $2.4 million and $3.3 million, respectively, of debt issuance costs recorded within Other assets.

The Company uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on certain assets and/or liabilities denominated in certain foreign currencies. During the year ended December 31, 2024, the Company entered into and settled forward contracts resulting in other expense of $2.0 million compared to other income of $2.1 million in the prior year. See Note 24, Hedging Activities, to the Consolidated Financial Statements for more information.

During 2022, the Company’s management initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization. The Company has achieved its initial full run-rate cost savings goal from the global cost and optimization program of approximately $20 million. In the first quarter of 2025, the Company approved additional actions under the program, which are expected to generate additional run-rate cost savings of at least $20 million. The program is expected to be substantially complete in the first half of 2025. The Company recognized $6.5 million, $7.6 million and $3.2 million of restructuring and related charges for the years ended December 31, 2024, 2023 and 2022, respectively, as a result of these programs and other facility closure actions. The Company made cash payments related to the settlement of restructuring liabilities under the program of $7.6 million and $9.8 million during the years ended December 31, 2024 and 2023, respectively. The Company expects total one-time cash costs of this program to be approximately 1 to 1.5 times annualized savings. See Note 7, Restructuring and Related Activities, to the Consolidated Financial Statements for more information.

As of December 31, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $17.3 million. The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability. However, should the entire liability be paid, the amount of the payment may be reduced by up to $5.6 million as a result of offsetting benefits in other tax jurisdictions. See Note 10, Income Taxes, to the Consolidated Financial Statements for more information.

On February 28, 2024, the Board approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock and replacing the prior share repurchase program, under which no repurchases were made in 2024. The 2024 Share Repurchase Program was effective immediately upon approval and has no expiration date. The Company made certain repurchases under the 2024 Repurchase Program during the year ended December 31, 2024, as mentioned above. As of December 31, 2024, there was approximately $100.8 million of capacity remaining under the 2024 Share Repurchase Program. See Note 8, Equity, to the Consolidated Financial Statements for more information.

The Company previously disclosed in its 2023 Form 10-K that one of its North American production facilities experienced an electrical fire in 2021 that resulted in property damage and the temporary shutdown of production. The Company and its insurance carrier reviewed the impact of the electrical fire on the production facility’s operations as it relates to a potential business interruption insurance claim. In July 2024, the Company and its insurance carrier settled this claim for $1.0 million. See Note 25, Commitments and Contingencies, to the Consolidated Financial Statements for more information.

The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, share repurchases, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies. The Company also believes it has sufficient additional liquidity to support its operating requirements and to fund its business obligations for the period beyond the next twelve months, including the aforementioned items which are expected to recur annually, as well as future principal and interest payments on the Company’s Credit Facility, tax obligations and other long-term liabilities. The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of global events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict. We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries. We may seek, as we believe appropriate, additional debt or equity financing that would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and organic investments. The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including the actual and projected demand for our products, specialty chemical industry conditions, competitive factors, and the condition of financial markets, among others.

The following table summarizes the Company’s contractual obligations as of December 31, 2024, and the effect such obligations are expected to have on its liquidity and cash flows in future periods. Pension and postretirement plan contributions beyond 2025 are not determinable since the amount of any contribution is heavily dependent on the future economic environment and investment returns on pension trust assets. The timing of payments related to other long-term liabilities which consists primarily of deferred compensation agreements and environmental reserves, also cannot be readily determined due to their uncertainty. Interest obligations on the Company’s long-term debt and capital leases assume the current debt levels will be outstanding for the entire respective period and apply the interest rates in effect as of December 31, 2024.

Payments due by period

(dollars in thousand) 2030 andBeyond

Purchase obligations 480 480 — — — — —

Non-GAAP Measures

The information in this Report includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, facilitate a comparison among fiscal periods, and exclude items that management believes are not indicative of future operating performance or core to the Company’s operations. Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP. In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP earnings per share, as discussed and reconciled below to the most comparable GAAP measures, may not be comparable to similarly named measures reported by other companies.

The Company presents EBITDA which is calculated as net income attributable to the Company before depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies. The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that management believes are not indicative of future operating performance or not considered core to the Company’s operations. In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that management believes are not indicative of future operating performance or considers core to the Company’s operations. Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively. The Company believes these non-GAAP measures provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.

Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures. Non-GAAP net income is calculated as adjusted EBITDA, defined above, less depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies, in each case adjusted, as applicable, for any depreciation, amortization, interest or tax impacts resulting from the non-core items identified in the reconciliation of net income attributable to the Company to adjusted EBITDA. Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the performance of the Company on a consistent basis.

Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation. The following tables reconcile the Company’s non-GAAP financial measures (unaudited) to their most directly comparable GAAP financial measures (dollars in thousands, unless otherwise noted, except per share amounts):

Acquisition-related expenses (a) 1,854 — 8,812

Customer insolvency costs (e) 3,213 — —

Impairment charges (k) — — 93,000

Russia-Ukraine conflict related expenses (l) — — 2,487

Non-GAAP operating margin (%) (r) 11.6 % 11.7 % 9.2 %

Equity (income) loss in a captive insurance company (h) (2,930) (2,090) 1,427

Acquisition-related expenses (credits) (a) 1,454 (475) 10,990

Customer insolvency costs (e) 3,213 — —

Facility remediation recoveries, net (f) — (2,141) (1,804)

Product liability claim costs, net (g) 2,040 — —

Business interruption insurance proceeds (i) (1,000) — —

Currency conversion impacts of hyper-inflationary economies (j) 811 7,849 1,617

Impairment charges (k) — — 93,000

Russia-Ukraine conflict related expenses (l) — — 2,487

Loss on extinguishment of debt (m) — — 6,763

Adjusted EBITDA margin (%) (r) 16.9 % 16.4 % 13.2 %

Acquisition-related expenses (credits) per diluted share (a) 0.06 (0.03) 0.49

Restructuring and related charges, net per diluted share (b) 0.28 0.32 0.13

Strategic planning (credits) expenses per diluted share (c) (0.01) 0.21 0.63

Executive transition costs per diluted share (d) 0.31 0.03 0.12

Customer insolvency costs per diluted share (e) 0.13 — —

Facility remediation recoveries, net per diluted share (f) — (0.09) (0.08)

Product liability claim costs, net per diluted share (g) 0.09 — —

Business interruption insurance proceeds per diluted share (i) (0.04) — —

Impairment charges per diluted share (k) — — 5.19

Russia-Ukraine conflict related expenses per diluted share (l) — — 0.12

Loss on extinguishment of debt per diluted share (m) — — 0.29

Other charges (credits) per diluted share (n) 0.05 0.09 (0.04)

Impact of certain discrete tax items per diluted share (o) 0.17 0.54 (0.26)

Non-GAAP earnings per diluted share (s) $ 7.44 $ 7.65 $ 5.87

(a)Acquisition-related expenses (credits) include expense associated with the Company's recent and potential acquisitions, including legal, financial, consulting and other costs. For the year ended December 31, 2022, these amounts also include costs incurred in connection with integration activities relating to the Houghton acquisition. See Note 2, Business Combinations, to the Consolidated Financial Statements for additional information.

(b)Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring program and facility closures. During 2024, 2023 and 2022, the Company recorded restructuring and related charges of $6.5 million, $7.6 million and $3.2 million, respectively. See Note 7, Restructuring and Related Activities, to the Consolidated Financial Statements for additional information.

(c)Strategic planning (credits) expenses include certain consultant and advisory expenses for the Company's long-term strategic planning, as well as process optimization and the next phase of the Company's long-term integration to further optimize its footprint, processes and other functions.

(d)Executive transition costs represent the costs related to the Company’s transition of executive officers.

(e)Customer insolvency costs represent charges associated with specific reserves for trade accounts receivable within the Company’s EMEA and America’s reportable segments related to two specific customers that filed for bankruptcy protection.

(f)Facility remediation recoveries, net represent insurance recoveries received for remediation and restoration of property damage to certain of the Company’s facilities and are recorded in Other income (expense). There were no gains recognized during the year ended December 31, 2024. See Note 25, Commitments and Contingencies, to the Consolidated Financial Statements for additional information.

(g)Product liability claim costs, net represents expenses related to the payments by the Company in connection with product liability disputes with customers, net of insurance recoveries during 2024. See Note 9, Other Income (Expense), net to the Consolidated Financial Statements for additional information.

(h)Equity income (loss) in a captive insurance company represents the after-tax income attributable to the Company’s equity interest in Primex, Ltd. (“Primex”), a captive insurance company. The Company holds a 32% investment in and has significant influence over Primex, and therefore accounts for this investment under the equity method of accounting. See Note 16, Investments in Associated Companies, to the Consolidated Financial Statements for additional information.

(i)Business interruption insurance proceeds reflects an insurance claim settlement receipt for the for the year ended December 31, 2024 related to production losses due to an electrical fire in 2021 that resulted in the temporary shutdown of production at one of the Company’s production facilities. See Note 25, Commitments and Contingencies, to the Consolidated Financial Statements for additional information.

(j)Currency conversion impacts of hyper-inflationary economies represent the foreign currency remeasurement impacts associated with the Company’s affiliates in Argentina and Türkiye whose local economies are designated as hyper-inflationary under U.S. GAAP. These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for each of the years ended December 31, 2024 and 2023 and 2022. The charges incurred related to the immediate recognition of foreign currency remeasurement in the Consolidated Statements of Operations. See Note 1, Basis of Presentation and Significant Accounting Policies, to the Consolidated Financial Statements for additional information.

(k)Impairment charges represent the non-cash charges taken to write down the value of goodwill for the year ended December 31, 2022. See Note 15, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements for additional information.

(l)Expenses related to the Russia-Ukraine conflict represent the direct costs associated with the Company's exit of operations in Russia during 2022. These costs included employee separation benefits, as well as costs associated with reserves for trade accounts receivable within the Company's EMEA reportable segment, where certain customers were impacted by the conflict between Russia and Ukraine or the Company's decision to end operations in Russia.

(m)In connection with executing the Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $6.8 million which includes the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Credit Facility. See Note 19, Debt, to the Consolidated Financial Statements for additional information.

(n)Other charges (credits) include charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves, non-service components of the Company’s pension and postretirement net periodic benefit income and expense and net gains recognized for the sale of certain facilities previously classified as held-for-sale. See Note 1, Basis of Presentation and Significant Accounting Policies, Note 7, Restructuring and Related Activities, and Note 20, Pension and Other Postretirement Benefits, to the Consolidated Financial Statements for additional information.

(o)The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions, provision to return and other adjustments, and the impact of certain intercompany asset transfers. For the year ended December 31, 2023, the impacts also included $6.7 million of withholding taxes for the repatriation of non-U.S. earnings. See Note 10, Income Taxes, to the Consolidated Financial Statements for additional information.

(p)Depreciation and amortization includes $1.0 million for each of the years ended December 31, 2024, 2023 and 2022, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Consolidated Statements of Operations, which is attributable to amortization of the fair value purchase accounting step-up in connection with acquisition of the Company’s 50% equity interest in Korea Houghton Corporation.

(q)Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.

(r)The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income, respectively, to consolidated net sales.

(s)The Company calculates non-GAAP earnings per diluted share as non-GAAP net income attributable to the Company per weighted average diluted shares outstanding using the “two-class share method” to calculate such in each given period.

Off-Balance Sheet Arrangements

The Company had approximately $6 million of bank letters of credit and guarantees as of December 31, 2024. The bank letters of credit and guarantees are not significant to the Company’s liquidity or capital resources.

Operations

Consolidated Operations Review – Comparison of 2024 with 2023

The following table summarizes the sales variances by reportable segment and consolidated operations from the prior year:

Americas (5) % (4) % (1) % — % (10) %

EMEA (5) % (4) % — % 3 % (6) %

Asia/Pacific 7 % (3) % (2) % 2 % 4 %

Consolidated (2) % (4) % (1) % 1 % (6) %

Net sales of $1,839.7 million in 2024 decreased 6% compared to $1,953.3 million in 2023, primarily due to a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of approximately 2%, and unfavorable impacts from foreign currency translation of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 1%. The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services. The decline in sales volumes was primarily a result of continuation of soft end market conditions compared to the prior year, primarily in the Americas and EMEA segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

Cost of goods sold (“COGS”) were $1,153.7 million in 2024 compared to $1,247.7 million in 2023. The decrease of COGS of $94.0 million, or 8%, reflects lower spend on the decline in current year sales volumes and a modest decline in the Company’s global raw material costs.

Gross profit was $686.0 million in 2024 compared to $705.6 million in 2023, a decrease of approximately $19.6 million, or 3%, primarily as a result of the decline in sales mentioned above, partially offset by a modest reduction in the Company’s global raw material costs. The Company’s reported gross margin in 2024 was 37.3% compared to 36.1% in 2023. The Company’s current year improvement in gross margin was primarily driven by our value-based pricing model and modest improvements in raw material costs.

SG&A was $484.8 million in 2024 compared to $483.6 million in 2023, an increase of $1.2 million, or 0.3%, primarily as a result of higher executive transition costs, higher customer insolvency costs, and SG&A relating to the IKV and Sutai acquisitions, partially offset by lower strategic planning expenses and favorable foreign currency translation compared to the prior year.

The Company incurred Restructuring and related charges of $6.5 million and $7.6 million during 2024 and 2023, respectively, related to reductions in headcount and facility closure costs under the Company’s restructuring program. See the Non-GAAP Measures section of this Item above and Note 7, Restructuring and Related Activities, to the Consolidated Financial Statements for additional information.

Operating income in 2024 was $194.7 million compared to $214.5 million in 2023. Excluding non-core items that are not indicative of future operating performance, as detailed above, the Company’s current year non-GAAP operating income was $213.7 million compared to $227.8 million in the prior year. The decrease in non-GAAP operating income was primarily due to lower gross profit, as described above.

The Company had Other income, net of $1.4 million in 2024 compared to Other expense, net of $10.7 million in 2023 due to lower foreign exchange losses of $1.8 million in the current year compared to losses of $14.8 million in the prior year. Additionally, the Company had higher non-income tax refunds of $3.7 million in the current year compared to non-income tax refunds of $1.3 million in the prior year. Other income, net in 2024 also included a business interruption insurance recovery of $1.0 million, other income of $0.4 million relating to adjustments to the earnout provisions for the Sutai acquisition, and $2.0 million of product liability claim costs. Prior year’s Other expense, net included $2.1 million of facility remediation recoveries, net.

Interest expense, net, of $41.0 million decreased $9.7 million in 2024 compared to $50.7 million in 2023, primarily as a result of lower outstanding borrowings and decreases in interest rates.

The Company’s effective tax rates for 2024 and 2023 were 31.8% and 36.3%, respectively. The Company’s current year effective tax rate was primarily impacted by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, provision to return and other adjustments, and withholding taxes, offset by changes in uncertain tax positions. The Company’s 2023 effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the mix of pre-tax earnings. Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2024 and 2023 effective tax rates would have been approximately 29% and 28%, respectively. In 2023, the Company recognized $6.7 million of withholding taxes for the repatriation of non-U.S. earnings that the Company does not believe is core or indicative of future performance and has adjusted these withholding taxes as a Non-GAAP measure. The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors. In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of variables, including forecasted earnings, which may vary.

Equity in net income of associated companies was $11.0 million in 2024 compared to $15.3 million in 2023. The decrease of $4.3 million was primarily due to lower current year income from the Company’s 50% equity interest in a joint venture in Korea offset by higher current year income from the Company’s equity interest in Primex.

Net income attributable to noncontrolling interest was approximately $0.1 million for both 2024 and 2023.

Consolidated Operations Review – Comparison of 2023 with 2022

The following table summarizes sales variances by segment and consolidated operations from the prior year:

Americas (6) % 8 % 1 % — % 3 %

EMEA (9) % 9 % 2 % — % 2 %

Asia/Pacific (7) % 4 % (4) % — % (7) %

Consolidated (7) % 7 % 1 % — % 1 %

Net sales were a record $1,953.3 million in 2023 compared to $1,943.6 million in 2022. The increase in net sales of approximately $9.7 million or 1% year-over-year was primarily due to an increase in selling price and product mix of 7% and approximately 1% favorable impact of foreign currency translations, partially offset by a decline in sales volumes of approximately 7%. The increase in selling price and product mix was primarily driven by year-over-year impact of our value-based pricing initiatives. The decline in sales volumes was primarily attributable to softer end market conditions across all regions, including the direct and indirect impacts of the UAW strike, the Company’s value-based pricing initiatives and customer order patterns, as well as the impacts of the ongoing war in Ukraine in the EMEA segment, and the wind-down of the tolling agreement for products previously divested related to the Quaker combination with Houghton International, Inc. (“Houghton”), partially offset by new business wins in all segments, as mentioned above.

COGS were $1,247.7 million in 2023 compared to $1,330.9 million in 2022. The decrease in COGS of 6% reflects lower spend on the decline in current year sales volumes, which more than offset higher costs due to inflationary pressures in the Company’s global raw material, manufacturing and supply chain and logistics costs compared to the prior year.

Gross profit in 2023 of $705.6 million increased $93.0 million or approximately 15% from 2022. The Company’s reported gross margin in 2023 was 36.1% compared to 31.5% in 2022. The Company’s current year improvement in gross margin was primarily driven by the year-over-year impact of our value-based pricing and margin improvement initiatives.

SG&A in 2023 increased $28.2 million compared to 2022 driven by higher labor-related costs including year-over-year inflationary increases and higher levels of incentive compensation on improved Company performance, partially offset by lower SG&A due to foreign currency translation compared to the prior year.

During 2022, the Company incurred $8.8 million of Acquisition-related expenses (credits). See the Non-GAAP Measures section of this Item, above. There were no similar costs incurred during 2023.

The Company incurred Restructuring and related charges of $7.6 million and $3.2 million during 2023 and 2022, respectively, related to the Company’s previous and current restructuring programs. See the Non-GAAP Measures section of this Item, above.

In 2022, the Company recorded a $93.0 million non-cash impairment charge to write down the value of goodwill associated with the Company’s EMEA reportable segment. This non-cash impairment charge was the result of the Company’s trigger based fourth quarter of 2022 impairment assessment. There were no similar impairment charges in 2023. See the Critical Accounting Policies and Estimates section as well as the Non-GAAP Measures section, of this Item, above.

Operating income in 2023 was $214.5 million compared to $52.3 million in 2022. Excluding the non-cash impairment charge, as well as other non-core items that are not indicative of future operating performance, the Company’s current year non-GAAP operating income was $227.8 million compared to $177.9 million in the prior year. The increase in non-GAAP operating income was primarily due to higher gross profit partially offset by higher SG&A, as described above.

The Company had Other expense, net of $10.7 million in 2023 compared to $12.6 million in 2022. The 2023 and 2022 results include $2.1 million and $1.8 million, respectively of facility remediation recoveries, net, while prior year’s Other expense, net also includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility and $2.4 million of expense related to an indemnification asset. Also, there were higher foreign currency transaction losses in 2023 compared to 2022.

Interest expense, net, increased $18.1 million compared to 2022, primarily driven by increases in the average borrowings outstanding coupled with an increase in interest rates year-over-year as the weighted average interest rate incurred on borrowings under the Company’s primary credit facility was approximately 6.2% during 2023 compared to approximately 3.0% during 2022.

The Company’s effective tax rates for 2023 and 2022 were an expense of 36.3% and 350.2%, respectively. The Company’s 2023 effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the mix of pre-tax earnings. The Company’s 2022 effective tax rate was driven by the non-cash impairment charge, the mix of pre-tax earnings, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits. Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2023 and 2022 effective tax rates would have been approximately 28% and 27%, respectively. In 2023, the Company recognized $6.7 million of withholding taxes for the repatriation of non-U.S. earnings that the Company does not believe is core or indicative of future performance and has adjusted these withholding taxes as a Non-GAAP measure. The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors. In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of variables, including forecasted earnings, which may vary.

Equity in net income of associated companies increased $13.4 million in 2023 compared to 2022, primarily due to higher current year income from the Company’s interest in a captive insurance company (see the Non-GAAP Measures section of this Item, above) due to higher market performance on equity investments and from the Company’s 50% interest in a joint venture in Korea due to overall market improvement.

Net income attributable to noncontrolling interest was approximately $0.1 million for both 2023 and 2022.

Reportable Segments Review - Comparison of 2024 with 2023

The Company’s reportable segments reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the Chief Operating Decision Maker of the Company assesses its performance. During the first quarter of 2023, the Company reorganized certain of its executive management team to align with its new business structure, which reflects the method by which the Company currently assesses its performance and allocates its resources. The Company has three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific. See Notes 1, 4, 5, and 15 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related product costs and other operating expenses. Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, impairment charges, and restructuring charges, are not included in segment operating earnings. Other items not specifically identified with the Company’s reportable segments include Interest expense, net and Other income (expense), net.

Americas

Americas represented approximately 48% of the Company’s consolidated net sales in 2024. The segment’s net sales were $882.1 million, a decrease of $95.0 million or 10% compared to 2023. This was driven by a decline in sales volumes of 5%, a decline in selling price and product mix of 4% and unfavorable foreign currency impacts of 1%. The decline in sales volumes was primarily driven by softer market conditions broadly across the portfolio, partially offset by new business wins. The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contacts and the mix of products and services. The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S. dollar against the Mexican peso and Brazilian real. Segment operating earnings in the Americas were $244.0 million, a decrease of $22.1 million or 8% compared to 2023 primarily driven by the decrease in net sales, partially offset by an improvement in segment operating margins driven by the Company’s margin improvement initiatives.

EMEA

EMEA represented approximately 29% of the Company’s consolidated net sales in 2024. The segment’s net sales were $536.4 million, a decrease of $34.9 million or 6% compared to 2023. This was driven by a decline in sales volumes of 5% and a decline in selling price and product mix of 4%, partially offset by a contribution of sales from the acquisition of IKV of 3%. The decline in sales volumes was driven by the continuation of soft end market conditions in the region, partially offset by new business wins. The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services. Segment operating earnings in EMEA were $99.4 million, a decrease of $5.4 million or 5% compared to 2023 primarily driven by the decrease in net sales, partially offset by an improvement in segment operating margins driven by the Company’s margin improvement initiatives.

Asia/Pacific

Asia/Pacific represented approximately 23% of the Company’s consolidated net sales in 2024. The segment’s net sales were $421.1 million, an increase of 4% or approximately $16.2 million compared to 2023. This was driven by an increase in sales volumes of 7%, a contribution of sales from the acquisition of Sutai of 2%, partially offset by a decline in selling price and product mix of 3% and unfavorable impact from foreign currency translation of 2%. The increase in sales volumes was primarily driven by new business wins coupled with a modest improvement in the end market environment. The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and mix of products and services. The unfavorable foreign currency translation was primarily due to the strengthening of the U.S. dollar against the Chinese renminbi. Segment operating earnings in Asia/Pacific were $122.7 million, an increase of $4.3 million, or 4%, compared to 2023 as a result of improvement in net sales, partially offset by a decrease in segment operating margins.

Reportable Segments Review – Comparison of 2023 with 2022

Americas

Americas represented approximately 50% of the Company’s consolidated net sales in 2023. The segment’s net sales were $977.1 million, an increase of $30.6 million or 3% compared to 2022. The increase in net sales was due to higher selling price and product mix of 8% and favorable foreign currency impacts of 1%, partially offset by a decrease in sales volumes of approximately 6%. The decline in sales volumes was primarily driven by softer market conditions, customer order patterns, the direct and indirect impacts of the UAW strike, and the Company’s value-based pricing initiatives, partially offset by new business wins. The increase in selling price and product mix was primarily driven by value-based price increases implemented to offset the significant increases in raw material, manufacturing and other input costs. The favorable foreign exchange impact was primarily due to the weakening of the U.S. dollar against the Mexican peso. This segment’s operating earnings were $266.0 million, an increase of $42.4 million or 19% compared to 2022 primarily driven by an increase in net sales and an improvement in segment operating margins driven by the Company’s ongoing margin improvement initiatives.

EMEA

EMEA represented approximately 29% of the Company’s consolidated net sales in 2023. The segment’s net sales were $571.3 million, an increase of $8.8 million or 2% compared to 2022. The increase in net sales was a result of a 9% increase in selling price and a favorable impact from foreign currency translation of 2%, which was partially offset by a decrease in sales volumes of approximately 9%. The increase in selling price and product mix was primarily driven by value-based price increases implemented to offset the significant increases in raw material, manufacturing and other input costs. The favorable foreign currency translation impact was primarily due to the weakening of the U.S. dollar against the Euro. The decrease in sales volumes was primarily driven by softer market conditions, the Company’s value-based pricing initiatives, customer order patterns and the impacts of the wind-down of the tolling agreement for products previously divested related to the Combination as well as the ongoing war in Ukraine, partially offset by new business wins. This segment’s operating earnings were $104.8 million, an increase of $28.4 million or 37% compared to 2022. The increase in segment operating earnings was primarily driven by an increase in net sales and an improvement in segment operating margins driven by the Company’s ongoing margin improvement initiatives.

Asia/Pacific

KWR US Equity

KWR · 10-K · period ended 2024-12-31

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 1C. Cybersecurity.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

KWR US Equity☆

KWR · 10-K · period ended 2024-12-31

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 1C. Cybersecurity.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

KWR US Equity